Panel Data Reduces Bias in Entry Models

18 Pages Posted: 13 Oct 2008

Date Written: 2006

Abstract

Entry Models such as Bresnahan and Reiss(91)[4] can under estimate the effect of competition. If the profitability of marketsis mismeasured, this introduces an positive correlation between unoberserved profitability and the number of firms in a market. Using data on entry and exit patterns in the Ready-Mix Concrete Industry from 1976-1999, I show that using fixed effectsin a Bresnahan-Reiss entry model reduces the coefficient on demand by 50% and increases the coefficient on competition by 100% compared to the no fixed effect benchmark.

Suggested Citation

Collard-Wexler, Allan, Panel Data Reduces Bias in Entry Models (2006). NYU Working Paper No. 2451/26088, Available at SSRN: https://ssrn.com/abstract=1281970

Allan Collard-Wexler (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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